A New Energy Landscape – Disruption & Creative Destructionism

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A New Energy Landscape – Disruption & Creative Destructionism

If your organisation uses energy, you should be eagerly anticipating the next consultation on reforming the business energy efficiency tax landscape. Originally set to be published in July however, the next consultation seems to have been disrupted by the British public’s decision on the 23rd June.

In the fall out we have seen DECC absorbed into a new Department for Business, Energy and Industrial Strategy.  So whilst everyone makes themselves comfortable, there appears to be a tempting vacuum for practitioners to pontificate about what the future holds.

Future Outlook

Overall, I think the direction of travel has been signposted reasonably clearly:

  1. The CRC goes by the end of the 2018-19
  2. The change will be “fiscally neutral”, with the existing Climate Change Levy (CCL) collecting the approximately £1billion of lost revenue
  3. There will be a new and streamlined reporting framework
  4. There is a commitment to deliver these objectives whilst ensuring that the smallest businesses and most energy intensive firms remain protected.

This all sounds reasonably encouraging but the changes to the CCL are worth a further look. CCL charges are forecasted to rise across the board and Gas CCL to equalise with Electricity CCL by 2025.  So anyone buying lots of gas at 1.5p per kWh should steady themselves for a material increase in their regulated energy costs.

And then there is the new reporting framework.  Who will it cover and what will be in scope?  If it is based on ESOS then many more companies will be required to report and clinics to assist compilers of grey fleet data will become a boom business.  That said surely any well managed business, can with the assistance of modern data technology and helpful advisors, put in place the most basic of processes to collect data that in all reality they should be collecting and analysing already.

Disruption

However, does any of this really matter?  Brexit has been thoroughly disruptive but in contrast to what the whole energy and climate change agenda might bring it is likely to be the equivalent of a mild cold.   How many businesses are prepared for a different energy landscape (note the subtle exclusion of the words “efficiency” and “tax”)?

The term disruption is often overused by entrepreneurs seeking to state their case for investment. However, “creative destructionism”, a term coined by Joseph Schumpeter, has been at the core of economic development since the beginning.  Has business ever been as usual – I think not.  Instead, entrepreneurs and technologies actively create disequilibrium and highlight new profit opportunities that did not previously exist and surely the time has come for the whole sustainability and energy landscape to be remodeled.

Getting Prepared

So, as for the policy landscape, collecting and reporting your energy data is really the bare minimum any business should be considering.  Every executive worth their salt should have one eye on the present and the other scanning the horizon preparing for tomorrow’s risks and opportunities.  So my advice would be to focus far more on this than on what tomorrow’s policy landscape will bring.

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